The Relative Value of Disease Management Programs Versus Drug Manufacturer Rebates

of this survey, the 18-month period ended in June 2001, the 20 physician groups almost universally did not know their actual SAI drugs costs, even for those medical groups that reported risk contracts with HMOs for these costs. Some readers may have difficulty understanding why and how a physician group would agree to accept financial risk for a cost center, in this case SAI drugs, that is poorly measured and not clearly defined. However, a survey performed a year earlier, in 1999, by Evergreen Re, a reinsurer based in Stuart, Florida, produced results that may have predicted the results found by Agnew, Stebbins, Hickman, and Lipton. As many as 30% of hospital and physician medical group executives in markets with considerable HMO penetration—at least 30%—had little understanding of their level of exposure to financial risk through their capitated contracts. The hospital and medical groups in the survey reported an average 36% of revenues from capitated contracts, and the average provider organization had capitated agreements with 5 HMOs. Many of the SAIs have a monthly drug cost of more than $1,000 per patient. There is probably the temptation for some HMOs to consider the transfer of financial risk, in this case for SAIs, to physician provider groups. This will also be a short-run game if (a) the expenditures for SAIs become significant and (b) the physician groups do not have control over benefit design (e.g., out-of-pocket cost-share amount, scope of coverage, and criteria for coverage). SAI drug cost is probably best managed by a shared financial risk arrangement in which the physician groups assume a relatively small portion (e.g., 20%) of the total financial risk and also enjoy a reasonable financial cap on losses (i.e., aggregate or patient-specific stop-loss).

of this survey, the 18-month period ended in June 2001, the 20 physician groups almost universally did not know their actual SAI drugs costs, even for those medical groups that reported risk contracts with HMOs for these costs.
Some readers may have difficulty understanding why and how a physician group would agree to accept financial risk for a cost center, in this case SAI drugs, that is poorly measured and not clearly defined. However, a survey performed a year earlier, in 1999, by Evergreen Re, a reinsurer based in Stuart, Florida, produced results that may have predicted the results found by Agnew, Stebbins, Hickman, and Lipton. As many as 30% of hospital and physician medical group executives in markets with considerable HMO penetration-at least 30%-had little understanding of their level of exposure to financial risk through their capitated contracts. The hospital and medical groups in the survey reported an average 36% of revenues from capitated contracts, and the average provider organization had capitated agreements with 5 HMOs. 14 Many of the SAIs have a monthly drug cost of more than $1,000 per patient. There is probably the temptation for some HMOs to consider the transfer of financial risk, in this case for SAIs, to physician provider groups. This will also be a short-run game if (a) the expenditures for SAIs become significant and (b) the physician groups do not have control over benefit design (e.g., out-of-pocket cost-share amount, scope of coverage, and criteria for coverage). SAI drug cost is probably best managed by a shared financial risk arrangement in which the physician groups assume a relatively small portion (e.g., 20%) of the total financial risk and also enjoy a reasonable financial cap on losses (i.e., aggregate or patient-specific stop-loss).
II Evidence-based Medicine, Practice Guidelines, and Disease Management Early in 2003, the Agency for Healthcare Research and Quality launched the Web-based National Quality Measures Clearinghouse to function as a repository for evidence-based quality measures and measure sets. 15 In January 2003, Kaiser Permanente announced that it would make available on its Web site more than 100 clinical practice guidelines (CPGs) that are used by Kaiser doctors for treatment of Kaiser HMO members. 16 CPGs are the operational (process) part of interventions to improve clinical, service and cost outcomes. CPGs are necessary to operationalize the evidence that results from the conduct of randomized controlled trials (RCTs). Without CPGs, it is possible to systematically apply RCT evidence to real-world clinical practice. When CPGs are defined clearly and in sufficient detail, it is possible to use feedback from performance measures to continually improve care in a disease management program.
Disease management programs are difficult to design, implement, operate, and maintain, 17 and, even today, there remains considerable frustration over the inability to reliably measure the financial value of disease management programs. 18 In this issue of the Journal, Cannon, Larsen, Towner, et al. describe a health system-wide effort to improve clinical outcomes in diabetes. 19 The authors report statistically significant and clinically important improvement in diabetes care according to 6 key performance measures: percentage of diabetics with at least 1 recorded hemoglobin A1c measurement per year, percentage of diabetics with hemoglobin A1c greater than 9.5, percentage of diabetics with hemoglobin A1c less than 7, percentage of diabetics with at least 1 recorded low-density lipoprotein (LDL) measurement per year, percentage of diabetics with recorded LDL value less than 130 mg/dL, and percentage of diabetics with at least 1 eye exam per year. The authors do not report an estimated return on investment in the diabetes care management system (DCMS) at this integrated health system.
The investment in care process models (CPMs) at Intermountain Health Care (IHC) is, in fact, large. Brent James, MD, and his colleagues at IHC have worked for nearly 20 years to create CPMs and measure their effects on clinical and service outcomes. James is fond of saying that clinical practice improvement will result in greater efficiency and, therefore, have a favorable effect on cost outcomes as well as clinical and service outcomes.
The results of the DCMS reported in this issue of the Journal are nothing short of exciting. Yet, readers should recognize that (a) this integrated health network (IHN) has been in the business of producing, implementing, and continually improving CPMs for nearly 20 years and (b) this is not just another integrated health system. SMG Marketing, now Verispan, has found IHC to be among the top integrated health systems in the United States since it began the measurement of integrated health systems 5 years ago.

II The Relative Value of Disease Management Programs Versus Drug Manufacturer Rebates
When the State of Florida in 2001 proposed a plan to extract additional rebates from prescription drug manufacturers through imposition of a preferred drug list (PDL) tied to a priorauthorization process, selected prescription drug manufacturers made counter proposals to sponsor disease management programs in lieu of paying additional rebates. In September 2001, Florida agreed to a proposal that projected savings of $16.3 million from establishment of 2 community-based disease management programs, one to hire health professionals and social workers to attend to Hispanic and Mexican-American Medicaid recipients with depression, HIV/AIDS, breast cancer, cervical cancer, or lung cancer. The explicit goal of this disease management program was to improve compliance with health regimens, including drug regimen adherence. 25 The second disease management program would hire and train community residents to help overcome language and cultural barriers to obtaining access to care for Medicaid recipients with depression and cardiovascular disease. The "savings" would apparently be measured in reduced emergency room visits and hospitalizations. The Pharmaceutical Research and Manufacturers of America (PhRMA) contested the Florida Medicaid program efforts to extract "supplemental" rebates, but a federal judge in the U.S. District Court in northern Florida (Tallahassee) ruled on December 28, 2001, that the Florida Medicaid list of preferred drugs may influence patient and physician behavior but did not prevent access to nonpreferred drugs, which would be illegal under federal law. 26 In September 2002, the Eleventh Circuit Court of Appeals (Atlanta) upheld the lower court' s ruling regarding the Florida program, and the legality of Medicaid supplement rebate programs based upon PDLs with prior authorization was bolstered by the decision from Federal Court Judge John Bates in Washington, DC, on March 28, 2003, regarding a similar program in Michigan that employed a PDL with prior authorization. 27 The value of disease management programs in lieu of concessions in direct drug cost was disputed by a report from the Office of Program Policy Analysis & Government Accountability (OPPA-GA) of the Florida legislature in early 2003. OPPAGA found that the disease management programs in Florida sponsored by prescription drug manufacturers saved the state about $35M in 2002, about $30M short of the amount that the drug companies would have paid in supplemental rebates. In 2001, Florida' s PDL saved the state $123M, including $46M (37.4%) from supplemental rebates. OPPAGA recommended to the Florida legislature that supplemental rebates be required for all drugs on the PDL and that the disease management programs be funded from a portion of the supplemental rebate income. 28 OPPAGA analysts also said that the methodologies used by the drug companies to calculate savings from the disease management programs were vague, and some experts opined that the drug manufacturers had not been able to show that their disease management programs save money despite offering these programs to health insurers and others since the mid-1990s. 29 From another perspective, it is easy to see why the pharmaceutical manufacturers are opposed to the heavy-handed managed care method imposed by prior authorization (PA). The PA process in Florida produced dramatic market share changes that would be the envy of managed care pharmacists in the private sector. In just 90 days, the market share of lansoprazole increased by an absolute 21 percentage points, or 55% in relative terms, from 38% of prescriptions for proton-pump inhibitors in the second quarter of 2001 to 59% of prescriptions for proton-pump inhibitors in the third quarter of 2001. 30 Lansoprazole market share increased further, to 67% of prescriptions in the fourth quarter of 2001. Stated another way, by paying supplemental rebates, the manufacturer of lansoprazole was able to nearly double its market share, a relative increase of 76%, or 29 absolute percentage points, in just 6 months, at the expense of competitor omeprazole, which experienced a market share drop of 33 percentage points, from 49% in the second quarter of 2001 and to 16% in just 90 days in the third quarter of 2001. The market share erosion for omeprazole was essentially 100%, to a residual of 1% of prescriptions for proton-pump inhibitors in the first quarter of 2002, a period of just 9 months.

II Disease Management, Pay-for-Performance, and Clinical Pharmacist Interventions in Diabetes Care
The April 2003 issue of a business news magazine contained 2 articles on the same subject, but the editor did not make an apparent connection between the articles and their common subject. More surprising, both articles were written by the same author. Certainly, the titles of the articles were different and would not suggest a connection: "Pay-for-performance plans seek to cut costs," 31 and "Pharmacist oversight cuts cost of chronic disease." 32 One article touted the "unique" notion of paying physicians to attain certain measures of disease management, in an employersponsored program called "Bridges to Excellence." The separate, front-page article, touted the value of pharmacists in managing chronic disease, particularly diabetes; incidentally, the pharmacists were compensated for the professional interventions. The former article reported that several large employers had invested in a scheme, labeled Bridges to Excellence, with the intended purpose of reducing future costs of chronic disease, specifically diabetes. The (physician) pay-for-performance program had the same expected outcomes as the pay-pharmacist program, the regular, routine use by patients of measures to better control serum glucose and thereby delay the onset and reduce the magnitude of complications of diabetes.
The pharmacist pay-for-outcomes program, the "Asheville Project," involved payment of $38 per monthly visit to participating pharmacists who monitor medication adherence and the routine use of serum glucose measures and perform basic physical exams to detect foot care or other health problems that may warrant a medical visit to a physician. The City of Asheville, a primary sponsor of the pay-pharmacist disease management program for diabetes, reported savings of $2,000 per diabetic patient per year, largely as a result of reduced hospital costs. Average total medical costs per diabetic patient were reported to be $7,082 prior to implementation of the pharmacist disease management program for diabetes, an average $5,210 (26% less) in the first year and $4,651 in year 2, a 34% reduction compared to base-year costs. The Asheville Project included incentives for patient participation, including the elimination of copayments for visits to pharmacists and diabetes drugs and supplies, and provided each participating patient with a glucose meter.